A Federal Court Upholds the Legality of California Workers’ Compensation Anti-Fraud Legislation With Additional Procedural Due Process Warranties

By David R. Ruiz

David R. Ruiz practices in the Strategy, Writs, and Appeals Team and in the Special Investigations Unit/ Insurance Fraud Litigation Team at Manning & Kass, Ellrod, Ramirez, Trester, LLP. Mr. Ruiz is also an associate Professor of Law at Glendale University College of Law.

Starting January 1, 2017, two Workers’ Compensation anti-fraud provisions came into effect that affect the ability of medical providers charged or convicted of fraud-related offenses to collect on their liens. Shortly thereafter, the provisions were challenged by a medical provider alleging in federal court that the provisions failed to guarantee due process. In an effort to prevent an injunction curtailing the application of the anti-fraud provisions, the California Legislature soon thereafter enacted AB 1422 clarifying the anti-fraud provisions. The federal court upheld the legality of the California anti-fraud provisions and added some limited notice and hearing requirements to guarantee due process to medical providers.

Labor Code section 4615 as amended by Senate Bill 1160 and effective January 1, 2017, provided for an automatic stay of the adjudication of medical treatment and medical-legal liens of those providers charged with a fraud-related offense. The stay was to be in effect from the time the charges were filed until the disposition of the criminal proceedings.